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Table of Contents
- Autumn Budget 2024: what was announced?
- Personal tax thresholds may go up from 2028
- What Our Nerds Say
- Fuel duty remains frozen
- Employers’ National Insurance hiked
- National minimum wage increase
- State pension increase confirmed
- Increases to capital gains tax
- Changes to inheritance tax
- No direct support for home buyers
- Finally, no news is good news for savers
Reeves has announced plans to plug a £22 billion ‘black hole’ in the public finances that the Labour government claims has been left by the Conservatives.
Reeves initially said that she was looking to cover a £22 billion shortfall. But in the Budget, she announced that she’s looking to raise £40 billion, mostly through a hike on employers’ National Insurance.
With these tax changes announced in the Autumn Budget, the government is aiming for major investment in the NHS and public services.
Autumn Budget 2024: what was announced?
Labour’s manifesto promised it wouldn’t increase taxes on ‘working people’, specifically rates of income tax, National Insurance or VAT.
However, tax changes announced in the Autumn Budget will affect people in varying ways, including employees, employers and small business owners.
Personal tax thresholds may go up from 2028
The previous government froze income tax and National Insurance thresholds until 2028, a move which had been described as a ‘stealth’ tax because people end up paying more tax as they earn more.
Despite speculation suggesting that the current government would extend the freeze on personal tax allowances, the Chancellor has announced that it will end in 2028.
This means that income tax and National Insurance thresholds will go up in line with inflation again starting from the 2028/29 tax year – from then you should keep more of your money.
Income tax in England, Wales and Northern Ireland has three tiers – basic, higher-rate and additional rate:
- 20% on earnings from £12,570 to £50,270 (basic)
- 40% on earnings from £50,271 to £125,140 (higher rate)
- 45% on earnings over £125,140 (additional rate)
Scotland’s income tax regime works differently.
Adam French, Senior Editor and Personal Finance Expert at NerdWallet
What our Nerds say…
“If the government moved tax bands in line with inflation the personal allowance would currently be £15,125, the higher rate of tax would begin at £60,484 and the additional rate wouldn’t be triggered until someone was earning £150,565.”
Source: Bank of England inflation calculator.
Fuel duty remains frozen
Reeves has announced that she’s maintaining the freeze on fuel duty, saying there’ll be no higher taxes at the petrol pump next year.
Previous speculation suggested that she would reverse the 5p cut that the Conservatives introduced in 2022. However, this cut will be maintained until at least 2026.
The AA had previously called for fuel duty to remain frozen because it claimed an increase would fuel inflation and hit the least well off and most vulnerable the hardest.
Employers’ National Insurance hiked
The Chancellor has announced that the employers’ National Insurance rate is increasing from 13.8% to 15% from April 2025.
What’s more, businesses will pay employers’ National Insurance on more of a worker’s earnings, starting from £5,000 rather than £9,100 currently.
Some smaller businesses and charities will be shielded from this change, because the employment allowance is going up to £10,500 from £5,000. Businesses are eligible for the employment allowance if they owed less than £100,000 in National Insurance in the previous tax year.
Organisations such as the British Chambers of Commerce and UK Hospitality believe that while employees won’t be directly affected by the National Insurance increase, they could be hit by decisions businesses take following the change.
For example, because their costs will increase, employers may offer lower salary increases or be more reluctant to hire new workers.
The Office for Budget Responsibility (OBR) has forecast in its growth estimates that employers will pass on the increase in National Insurance.
National minimum wage increase
The minimum wage is going up for many people.
The national living wage for those who are 21 and over is going up by 6.7% in April 2025, from £11.44 to £12.21 an hour.
The national minimum wage for people who are between 18 and 20 is going up to £10 an hour from £8.60.
State pension increase confirmed
Under the triple lock, state pensions will increase by 4.1% from April 2025. This means pensioners will get an extra £470 next year.
The triple lock ensures that pensions go up in line with wage growth next year, which is higher than the current level of inflation.
Increases to capital gains tax
Reeves has announced that the capital gains tax rate is increasing to 18% for lower rate taxpayers and 24% for higher rate taxpayers.
The rates are currently 10% and 20% respectively. The increase in capital gains tax (CGT) comes into effect from 30 October 2024.
Capital gains tax will remain the same on the sale of residential property, at 18% for basic rate taxpayers and 24% for higher rate taxpayers.
This means that people with assets such as shares will primarily be affected by the change. Investors should ensure they’re making the most of tax-efficient wrappers such as stocks and shares ISAs.
You declare CGT when you sell an asset that’s increased in value. These assets can include second homes, buy-to-let properties, business assets and shares that are outside of a tax-free wrapper such as an ISA.
Changes to inheritance tax
The government is extending the freeze on inheritance tax thresholds by two years, meaning it will now last until 2030.
In terms of the headline threshold, there’s no inheritance tax due on estates valued below £325,000. The residence nil-rate band gives an additional £175,000 allowance when a home is left to direct descendants.
As far as taxes go, inheritance tax is one of the country’s least-liked, even though it’s not due on the majority of estates.
But with thresholds frozen, more estates are due to be caught in its net. This is down to ‘fiscal drag’, because the value of estates is set to increase due to inflation.
The government has also tinkered with some of the reliefs available on inheritance tax:
- agricultural property relief and business property relief will be reformed from April 2026, with reductions to these reliefs introduced under certain circumstances
- unspent pension pots will be subject to inheritance tax from April 2027
No direct support for home buyers
Despite hopes that the £425,000 nil-rate stamp duty threshold for first-time buyers would be kept beyond March 2025, it’s still due to go back down to £300,000 from April.
However the Chancellor is hoping that increasing stamp duty on the purchase of second homes will help make more properties available for both first-time and main-home buyers.
From 31 October 2024, the rate for second homes will go up from 3% to 5%.
Many experts called on the government to extend first-time buyer relief. The Resolution Foundation, an independent think-tank, had called stamp duty a “bad tax” that restricts people’s ability to move, and that the increased threshold for paying stamp duty should be made permanent.
UK Finance, the association representing the banking sector, had also argued that the first-time buyer stamp duty threshold of £425,000 should be kept. The HomeOwners Alliance has even called on the Chancellor to scrap stamp duty completely for people buying a home to live in.
Finally, no news is good news for savers
Despite widespread speculation about what Reeves had in store for savers, she didn’t announce anything that would hit ISA savers or those saving for retirement.
The government didn’t announce a rumoured limit on the overall amount you can have saved in ISAs and it announced that the £20,000 ISA allowance will remain the same until April 2030.
When it comes to pensions, many experts speculated about a reduction in pension tax relief or the tax-free lump sum you can take when you start drawing on your pension. Again, Reeves chose not to announce any changes here.
» MORE: How Does the King’s Speech Affect Your Money?
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